IRS Gave Car Tax Credit Without Proof

August 26th

A recent review by the Treasury Inspector General for Tax Administration, J. Russell George, suggests that the IRS may have granted more than $150 million in car purchase tax deductions to thousands of people who had no proof they had actually bought the car. In fact, the Treasury Inspector General stated, in a report issued Wednesday, that the IRS failed to identify 4,257 people who had claimed an estimated total $150.1 million in “excessive” motor vehicle deductions.

After an investigation of IRS deductions, related to the 2009 American Recovery and Reinvestment Act stimulus program, George has found that in actuality taxpayers do not need to provide any concrete third-party evidence to support claims they purchased a qualified motor vehicle. The report applies to the stimulus period from February 17 to December 31, 2009, when the government was awarding deduction for state sales and excise taxes paid on qualified vehicle purchases.

Erroneous Tax Deductions

Treasury Inspector George also found that 473 people erroneously received a total of about $1 million in qualified motor vehicle deductions, simply because the IRS was unable to tell that the applicants were in prison, dead or underage.

While the IRS does not dispute these figures, they argue that they study focused on only a small percentage of the total 4.3 million taxpayers who claimed the deduction. However, the inspector disputes this, pointing out the importance of monitoring the spending of taxpayers’ dollars carefully.

The IRS has confirmed that it will review all the cases covered in the study. IRS Audits will be carried out if warranted.